Daily iron ore price update (scrap imports)

by Chris Becker

Spot prices slipped yesterday with the Tianjin price down over 1% while Dalian futures were also volatile in morning trade before recovering alongside other assets in China in the afternoon:

Meanwhile, according to Metalminer  China is expected to drive a surge in scrap imports, due to a recent relaxation of scrap import quotas on ore prices have remained stubbornly high. Increasing those imports could soften seaborne iron ore demand:

 China has not imported significant volumes of scrap since a change in regulations in 2017. Levels have been controlled by import quotas. As such, demand has in part been met by importing semis, like rods, from Malaysia and billets from Russia.

Scrap consumers in the rest of Southeast Asia are watching developments with some degree of trepidation.

Those consumers are expecting Chinese scrap demand could drive up the region’s prices and reduce availability. Worst case, this could encourage resource nationalism. Countries could impose a ban or limits on scrap exports to protect domestic availability or cap price rises.

Ultimately, if scrap prices do rise, rebar and billet prices will likely rise. Excess Chinese production would struggle to find a home regionally, with many countries like Vietnam not allowing rebar imports.

Japan’s Nippon Steel closed six blast furnaces at the start of the pandemic. However, the company is suffering from poor demand (even during H2 2019). While JFE expects to bring its one closed blast furnace back on stream later this year, Nippon has no plans to do the same before 2021 — underlining the continued depressed nature of the market.

Well-managed supply from Australia and anxiety over availability from pandemic-hit Brazil will likely continue to support iron ore prices. As if to support supply constraints — or, maybe, in retaliation for political discourse with Australia — China imported iron ore from a wider range of sources in Q2 and Q3. The most notable import sources were Canada, Ukraine and India, Reuters reported this week.

 

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Comments

  1. Why did China have a quota on imported scrap in the first place if it was still experiencing strong demand for steel?

    Surely using scrap is cheaper than producing new steel?

    • Apparently it was part of their environmental drive
      https://www.bloomberg.com/news/articles/2019-09-24/china-s-steel-scrap-imports-hit-zero-for-first-time-in-20-years

      The world’s top steel producer bought no scrap at all from overseas in August, according to customs data Monday, capping years of dwindling volumes, after President Xi Jinping imposed sweeping curbs on all imports of solid waste to help protect the environment.

      While it says “no scrap” for August they have been slowly adjusting the rules so that higher purity scrap materials could be reclassified. Also the quotas have been slowly rising each year as well.

      • pfh007.comMEMBER

        Thanks !

        I understand not wanting Aussie rubbish but I am not sure how scrap metal is an environment problem. Surely producing new steel involves more pollution.

  2. Scap is mooted a couple of times a year (like India once was) but even the article author seems resigned to iron ore.